Falling New Vehicle Sales Point to Bigger Problems
The latest data from the auto industry could point to worrying signs of the US consumer’s propensity to spend.
Major automakers around the world released their auto sales results in March. Taken together, the major automakers recorded double-digit declines in new vehicle sales. General Motors said last week that unit sales were down 20% for the quarter that ended March 31; Honda lost 23%. Toyota appeared to be the “best” performer of the bunch, with sales down 15%.
Headlines announce that chip shortages and supply chain disruptions continue to dampen new vehicle sales (the Russian-Ukrainian war is also hitting supply chains). And in general, as Reuters noted, automakers expect demand to be strong in the months ahead, supported in part by strength in the labor market.
But some signals at the end of the quarter suggest a little turbulence in this demand. Yes, it is a truism that lack of available inventory means unit sales would drop year after year. Simply put, being able to build fewer cars means fewer cars end up on the proverbial lots.
The constraints are such that the annual rate of sales of new vehicles amounts to just over 13 million; last year, that score stood at just over 15 million, up just over 3% from 2020 levels.
Used car inflation
The lack of inventory has also pushed up used car prices, mainly because supply is only available to partially meet demand.
To that end, it is perhaps not so surprising that over the past few months there has been a wave of fundraising and e-commerce platform expansions aimed at bringing dealers, buyers and sellers. Consider, for example, that e-commerce platform Shift has disclosed an acquisition that will accelerate its ability to create a digital marketplace that will allow dealerships and independent sellers to list their used cars alongside owned inventory. Shift.
Read more: Used car e-commerce platform expects the market to also list other people’s cars
But beyond the shortages, as to what is available, March was the first month in which we saw the full impact of the Russian invasion of Ukraine. Inflation was a consequence of geopolitical turmoil. And inflation is well entrenched in vehicle sales. As the latest consumer price data from the US Department of Labor shows, prices paid on new vehicles rose 12%, used vehicles rose 41%.
At some point – perhaps soon – the pressures of inflation will put the brakes on, so much so that the decline in unit sales will be, for lack of a better word, organic. We may not see anything on the order of the 2020 vehicle sales recession, where job losses and a health crisis caused unit sales to plummet in the mid-teens.
The road ahead for new vehicle sales is strewn with pitfalls.